HDFC Bank profit rises 20%, but bottomline lags topline growth

The country's most valuable lender, HDFC Bank, on Thursday reported a 20.2% (Y-o-Y) rise in its net profit to R3,238.9 crore for the quarter ended June 30, led by a 10 bps expansion in its net interest margin (NIM).

he net interest income (NII) — the difference between interest earned and interest expended — rose by 21.8% to Rs 7,781.4, while the growth in non-interest income lagged at 14%.

The country’s most valuable lender, HDFC Bank, on Thursday reported a 20.2% (Y-o-Y) rise in its net profit to Rs 3,238.9 crore for the quarter ended June 30, led by a 10 bps expansion in its net interest margin (NIM). Despite this, for the second consecutive quarter, its bottom line growth lagged the rise in its top line as higher operational expenses ate into margins. The net interest income (NII) — the difference between interest earned and interest expended — rose by 21.8% to Rs 7,781.4, while the growth in non-interest income lagged at 14%. As a result, total income rose 17.1% (Y-o-Y) to Rs 19,322.6 crore.

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Sequentially, the bank reported a 4% decline in its net profit, as an over 30% jump in provisions, necessitated by Rs 528.1-crore rise in gross non performing assets (GNPAs), and a marginal drop in non-interest income eroded gains out of a 10 bps expansion in NIM. As a result of the fresh slippages, the bank’s GNPAs, as a a percentage of total advances, stood at 1.04% at the end of the quarter. The bank said its total advances grew 23.2% (Y-o-Y) and stood at Rs 4.7 lakh crore at the end of the quarter, while deposits increased by 18.5% (y-o-y) to Rs 5.73 lakh crore.

After the announcement of results, HDFC Bank’s deputy managing director Paresh Suthankar said the bank’s advances to both the wholesale and the retail segments grew by an identical 24.5% during the quarter. While most of the the growth in wholesale advances were accounted for by working capital loans, retail loan growth was led by credit cards, which grew by 26% (Y-o-Y) and personal loans, which rose 41% (Y-o-Y), he said. Attributing the rise in GNPAs to slippages in the small and medium-sized enterprises (SME) segment, Suthankar said it wasn’t too sharp a rise and the bank has easily pulled back from similar short-term blips in the past. “It happens every now and then,” Suthankar quipped.